How charities can prepare for an audit: A practical guide

For many charities, the word "audit" can cause anxiety – especially when teams are small and juggling multiple responsibilities. But preparing for an audit doesn't have to be stressful. With the right planning, clear communication, and a supportive relationship with your auditor, the process should not only be manageable, but also maximise the benefits of constructive observations and recommendations.

This guide outlines practical steps to help you prepare for an audit and get the most value from the process

Do we need an audit?

First, determine whether your charity requires a statutory audit. In England and Wales, a charity audit is mandatory if:

• Income exceeds £1 million, or
• Income exceeds £250,000 and gross assets exceed £3.26 million, or
• The charity’s governing document requires it, or
• The trustees request one.

(Note: These thresholds are currently under consultation and may rise soon.)

Occasionally, other legal or regulatory obligations may also apply. Be sure to check the criteria thoroughly –there’s no “year of grace” under charity law, so it’s not uncommon for a charity to find itself needing an audit with little notice.

Key steps to prepare for an audit

1. Understand the audit requirements

Familiarise yourself with the regulations and accounting standards that apply to your charity, particularly the Charities SORP. Your auditor will send a pre-audit request list – review this carefully and raise with the auditor any items you don’t understand or can’t provide.

2. Organise financial records

Complete and well-organised records are essential. Focus on:

• Income: Auditors will want to review documentation on all income sources – donations, grants, legacies. Expect to provide correspondence from solicitors and grant agreements.
• Expenses: Invoices should be accessible (electronically or otherwise), along with contracts and leases.
• Bank statements: Make sure all accounts are reconciled, interest is accounted for, and any reconciling items are listed. The records should be readily available in your accounting system.
• Fixed assets: Keep your fixed asset register updated, with disposals recorded and depreciation accurately calculated.

3. Review internal controls

Good internal controls support both financial integrity and legal compliance. Refer to the Charity Commission’s updated guidance (November 2024): Internal financial controls for charities (CC8).

If you have a Finance Manual or similar documentation, share this with your auditor – it speeds up the audit and provides the relevant framework for testing.

4. Communicate with your auditor

Auditors are more than just external checkers – they work best when you treat them as part of your extended team. Open, collaborative communication is key to a smooth audit.

• Agree a clear timetable together. If the plan doesn’t work for your team, let your auditor know so it can be adjusted.
• Encourage time on site. Audits are most effective when the auditor spends time with your team face-to-face, gaining a better understanding and reducing follow-up queries.
• Discuss new grants early. If your charity has received new funding during the year, it’s often helpful to meet around the year-end to agree how to account for it. This avoids revisiting key account judgments during the audit.
• Ask questions. If you’re unsure about a request, or have a more efficient way to provide the information, share it. You know your charity best.
• Your auditor should keep you updated as the audit progresses. If you're unsure about outstanding items or next steps, ask.

5. Brief your team

Let your staff know what's expected of them during the audit. Assign responsibilities and make sure everyone involved is ready to respond to queries or supply supporting documents.

6. Stay organised

Track audit requests and communications. At Larking Gowen, we use Inflo Collaborate, which allows our clients to manage requests, upload documents, and review correspondence in one secure platform.

Need help?

Preparing for an audit may feel overwhelming, but with early planning, clear roles, and strong collaboration, it can be a smooth – and even valuable – experience. Consider your auditor as part of your team. Being open about any issues or uncertainties will help them help you, ultimately leading to more efficient and effective audit testing.

If you'd like to discuss how best to prepare for your audit, we’re here to help. Please contact your usual adviser, visit the Our People section of the Larking Gowen website, call 0330 024 0888, or email enquiry@larking-gowen.co.uk.

Emma Hayward